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Indiana’s problem with brain drain is that its business community is too weak to offer enough jobs or high enough pay to keep graduates with the best money-making potential—those with degrees in science, technology, engineering, math and business.

That’s the conclusion of a new analysis by Columbus, Ohio-based consulting firm Battelle.

The study, commissioned by the Central Indiana Corporate Partnership and funded by Lilly Endowment Inc., suggests Indiana could turn its predicament into a strength by capitalizing on the surplus of college graduates produced every year by Indiana’s colleges and universities.

“We just aren’t generating enough of the job opportunities to capture the talent reserve that we have,” said David Johnson, CEO of the Central Indiana Corporate Partnership, an economic development group headed by the CEOs of Indiana’s largest employers.

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Click here to read why Indiana doesn't have a problem with overall brain drain of college graduates.

While Indiana ranks well overall in retaining college graduates, the state keeps fewer of its college graduates with degrees in science, technology, engineering and math, or the STEM disciplines.

The same trend appears to be true for those majoring in business, Battelle found in its analysis of employment data collected by the Indiana Department of Workforce Development for graduates of Indiana public universities.

Among 2009 graduates of the universities, Battelle found that 53 percent remained in Indiana one year later. But among graduates with STEM or business degrees, only 42 percent remained in Indiana a year later.

The Department of Workforce Development collects data only from public universities. The leading source of data for graduate mobility, the Baccalaureate & Beyond survey, is not large enough to break down its state-by-state results by graduates’ majors.

Graduates with STEM and business degrees are more likely to command higher wages, the Battelle study noted, because they are more likely to work for companies serving national and global markets. Such companies bring new wealth to a state from outside markets. By contrast, locally focused enterprises such as hospitals, law firms or schools are financed primarily by the wealth of the residents already in a state,

Indiana has a deficit in almost all industries that are nationally or globally focused, the Battelle report concluded. The report analyzed the concentration of workers in such industries as a percentage of all workers in Indiana. Battelle called such industries “traded sector industries.”

“Across nearly all high-skilled occupations critical to traded sector industries, Indiana is either growing slower or declining faster than the U.S. average,” Battelle researcher Walt Plosila wrote in the report. “This is a clear indication of the weakness in demand for high-skilled occupations appropriate for bachelor’s-and-above college graduates found in Indiana.”

Key occupations in decline include engineers, engineering technicians, managers and those in business and financial operations. The few that are growing include computer-related workers, life scientists and physical scientists.

Yet the report strikes a hopeful note because Indiana sends more students to college and also graduates more than most states do. In fact, Indiana’s colleges and universities do such a good job attracting students from out of state that Indiana has a net gain of more than 8,000 students a year.

The reigning theories of economic development say that employers ultimately locate closest to the best pools of talented workers. So Indiana has a huge opportunity to market its surplus of graduates to employers, Plosila noted in the Battelle report.

However, Ball State University economist Michael Hicks said Battelle has misdiagnosed the problem and, therefore, given the wrong prescription for Indiana.

Indiana should stop expecting to keep more of its college graduates than the rest of the country, Hicks said. This is especially so, he said, because of the presence of Purdue University, which offers world-class programs in engineering and technology that are not matched by any institution in the states bordering Indiana.

“It would be astonishing if we didn’t export STEM people,” Hicks said.

Even with that, 63 percent of Purdue’s recent bachelor’s degree recipients remain in Indiana and 87 percent of Purdue’s Hoosier-native alumni have remained in the state, according to data from the school’s graduating classes of 2007 through 2011.

Instead of trying to connect more of those graduates with jobs in Indiana, Hicks said, local and state leaders should focus on the basics of making their communities attractive: improving schools, offering attractive parks, mowing the medians.

If communities are attractive to workers then, in the long run, Hicks said, employers will bring jobs to those communities.

As an example, he cited the decision of California-based American Specialty Health Inc. to move its headquarters to Carmel and create 675 jobs there.

It did so, Hicks contends, not because 675 people were waiting to be hired in Carmel, but because the company’s executives are confident Carmel will be a desirable place for 675 workers to live.

“The problem is not an engineering bachelor’s degree or master’s degree. It’s simply having places that people wish to live,” Hicks said. “If you drive around too many Indiana communities, they’re just unattractive places to live.”•

Wall's career as a journalist was set in fifth grade, when he took on an afternoon paper route for The Indianapolis News. He admits to being a terrible paperboy because instead of delivering the newspaper right away, he would sit and read it for hours. He may have lost some customers, but he never lost the bug for news. A lifelong resident of central Indiana, Wall grew up in Sheridan—the one spot in Hamilton County untouched by suburbia. After graduating from DePauw University in Greencastle, he joined The Indianapolis Star as a business reporting intern and refused to leave until he had a full-time job. Wall stayed there five years before joining IBJ in February 2007. Wall and his wife now live in Indianapolis with their two sons. When not at the office, the Walls spend time with their extended family and worship at Christ Church Reformed Presbyterian in Brownsburg.

all’s career as a journalist was set in fifth grade, when he took on an afternoon paper route for The Indianapolis News. He admits to being a terrible paperboy because instead of delivering the newspaper right away, he would sit and read it for hours. He may have lost some customers, but he never lost the bug for news. A lifelong resident of central Indiana, Wall grew up in Sheridan—the one spot in Hamilton County untouched by suburbia. After graduating from DePauw University in Greencastle, he joined The Indianapolis Star as a business reporting intern and refused to leave until he had a full-time job. Wall stayed there five years before joining IBJ in February 2007. Wall and his wife now live in Indianapolis with their two sons. When not at the office, the Walls spend time with their extended family and worship at Christ Church Reformed Presbyterian in Brownsburg

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